Transfer on Death Deeds (commonly referred to as TODDs) have become a popular estate planning tool in Minnesota. TODDs, like any other deed, convey real property from one person to another. They are recorded prior to the grantor-homeowner’s death, but do not become effective until after the grantor’s death, thereby allowing the home owner to retain all right, title and interest in their home during their lifetime, but allowing the property to smoothly and easily pass to the grantee outside of probate.
In December 2019, however, a wrinkle in that smooth efficacy came to light in Strope-Robinson vs. State Farm Fire & Casualty Co, 429 F.Supp.3d 634 (D. Minn. 2019).
In this case, Mr. Strope executed and recorded a TODD that would transfer his home to his niece, Ms. Strope-Robinson. The home was insured by State Farm, and Mr. Strope was the only named insured under that policy. Mr. Strope died on August 14, 2017, effectively transferring the home to Ms. Strope-Robinson.
On August 20, 2017, Mr. Strope’s ex-wife burned the house to the ground.
Ms. Strope-Robinson filed an insurance claim for the destruction of the home.
The court appointed Ms. Strope-Robinson as the Special Administrator of the Estate on October 24, 2017, and the Estate’s Personal Representative on September 17, 2018.
State Farm denied the claim, and Ms. Strope-Robinson sued State Farm to recover the casualty insurance benefit.
In its order, the court reiterated Minnesota’s long-standing principle that fire insurance policies are contracts that are personal to the insurer and the named insured, and do not attach to, or run with the insured property. Therefore, because Ms. Strope-Robinson was not a party to the insurance contract, and because Mr. Strope did not own the house (and therefore did not have an insurable interest in the house) at the time of the fire, there was no named insured with an interest in the dwelling, and no casualty insurance coverage was available.
Ms. Strope-Robinson appealed. As of this writing, oral arguments have not yet been heard, so this issue is still unresolved by the federal courts. Until then, property owners with recorded TODDs are encouraged to consult with their insurance agent about how to best protect their real property during that time between their death and the grantee securing insurance of their own.